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The Military's Economic Role

The main economic entity in Cuba today is the Revolutionary Armed Forces (FAR). Officially no data has been disclosed, but some experts estimate that military companies already account for about 70% of the national economy, while the most important and lucrative sectors, offering safe profitability, boast a privileged, even monopolistic position.

Cuba's military monopoly, Grupo de Administración Empresarial SA (“GAESA”), which is run by Raul Castro's son-in-law, is the biggest economic entitry on the island. The Cuban military controls, through the GAESA Group, the tourism sector, with the company Gaviota SA, the largest in Cuba and that which has grown the most in recent years, covering sectors such as air and land transport for tourism, and almost a complete monopoly on the stores collecting foreign currency through the CIMEX. There are many other prominent military companies in the Cuban economy, such as Unión de Construcciones Militares (UCM), which has a monopoly on commissions for the most important and strategic works in the country, such as hotels for international tourism, reservoirs, and channels.

Donald Trump changed the policy of the United States toward Cuba on 19 June 2017. The new policy channels economic activities away from the Cuban military monopoly, Grupo de Administración Empresarial (GAESA), including most travel-related transactions, while allowing American individuals and entities to develop economic ties to the private, small business sector in Cuba. In one of the most important changes, transactions with the Business Administration Group, S.A — GAESA — will be prohibited. The ban on doing business with GAESA and its subsidiaries should be another blow to the regime’s finances. By blocking transactions with companies linked to the Cuban military, Trump closes a foreign-exchange ticket, and at the same time sent a political message not to do business with the military.

Since the beginning of the economic crisis in the early 1990s, the military has become increasingly involved in the nation's economy. Such involvement was officially denoted as a new responsibility for the MINFAR in early 1991, when Fidel Castro declared, "[O]ne of the Armed Forces' missions at this time is to help the economy." The military's interest in this economic involvement has been spurred as much by concerns over the loss of the military aid and training once provided by the Soviet Union as by the weakness of the civilian economy, which has forced reduced government spending on the armed forces and the inception of the MINFAR's efforts to "self-finance" a portion of its budget. In addition, this involvement has helped the military avoid further reductions in personnel that might otherwise have been necessary. Toward the end of the 1990s, some reports estimated that the MINFAR had managed to provide for as much as 80 percent of its spending needs through self-financing.

The MINFAR's efforts to achieve heightened efficiency and productivity through management innovations in its enterprises, known as the SPE (System for Managerial Improvement), can be traced to policies embraced as early as 1987. The severity of the economic crisis, however, spurred the military to become more extensively involved in agricultural production. During the most difficult years of the economic crisis in the early 1990s, the military's troops, often having just returned from "internationalist" duty, were routinely deployed in the fields in intensive efforts to boost crop yields, and its trucks were used to help farmers transport their goods to the newly opened farmers' markets. The participation of MINFAR troops in the annual sugar harvest (zajra) and in planting or picking other crops was not unprecedented; however, it did mark the first time in twenty years that regular troops had been assigned to such tasks. During this period, the military is generally considered to have achieved self-sufficiency in terms of its ability to feed its troops, and surplus produce from the military farms (granjas) was sold to bring in additional revenue.

Perhaps the most important facet of the military's economic involvement came about after the government's 1990 decision to legalize joint investment ventures, when the military became a dominant partner in the state tourism company known as the Gaviota Tourism Group, S.A. Gaviota was originally formed in 1988 in order to provide support for vacations by Cuban and Soviet military personnel on the island. In its new incarnation, Gaviota has teamed with such foreign partners as Spain's Sol Melia and Tryp hotel chains and France's Club Med in order to bring in significant hard-currency earnings for the MINFAR. Gaviota has been active in both the management and the administration of the tourism projects funded by foreign capital, which include four-and five-star hotels and resorts located in prime tourism spots, such as Varadero. It also established subsidiary operations, such as AeroGaviota, which operates domestically to fly tourists to their vacation destinations.

Although the exact connection between Gaviota and the armed forces hierarchy has not yet been publicly clarified, it is widely acknowledged that, since the early 1990s, the firm has been routinely used as a source of employment for loyal officers who are formally retired from active duty. Some direction is provided through the MINFAR's Vice Ministry for Economic Affairs, which in the late 1990s was headed by a Politburo member, Division General Julio Casas Regueiro, the former commander of the Antiaircraft Defense and Revolutionary Air Force (Defensa Antiaerea y Fuerza Aerea Revolucionaria - DAAFAR).




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